ORIGINAL REPORTING: Key regulatory decision leaves California reliability issues unresolved, aggravates tensions

Key regulatory decision leaves California reliability issues unresolved, aggravates tensions; A major decision in the years-long process to figure out how to share "attributes" of IOU legacy resources needed to meet state renewables mandates could weaken collaboration between LSEs.

Herman K. Trabish | September 8, 2021 (Utility Dive)

Editor’s note: The debate over how to apportion the costs of legacy generation is becoming more heated as electricity rates rise.

With hurricanes and wildfires across the country making concerns about reliability more urgent than ever, there is much to learn from how a regulatory decision weakened a fragile collaboration between California's traditional and new load-serving entities (LSEs).

Primarily because of new community and customer choice providers' success in the last decade by marketing to customers who want more clean energy, California now has over 40 LSEs, led by the fast-growing Community Choice Aggregations (CCAs). But regulators' May 20 decision disrupted a budding collaboration and increased tensions between investor-owned utilities (IOUs) and the new LSEs by delaying reallocation of existing reliability resources among them, leaving the new LSEs with the growing costs of procuring reliability through power markets.

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Reliability "is being reinvented on the fly in California, with the threat of blackouts or shortfalls now not just during peak summer days but all the time," said Center for Energy Efficiency and Renewable Technologies (CEERT) Executive Director V. John White. "This decision settles compliance with the LSEs' renewables mandates but meeting the reliability obligation has become more difficult and expensive."

This decision on reliability — labeled resource adequacy (RA) in California — in the Power Charge Indifference Adjustment (PCIA) proceeding, revealed two important things, White, along with utility and other LSE executives told Utility Dive. The power outages and uncertain system reliability made clear last August in California, last February in Texas, and threatening other parts of' the country this summer have focused policymakers in most states on the new need for RA.

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The absence of a definitive decision in California on who owns resources to provide that reliability has aggravated tensions between the emerging LSEs and the long-dominant IOUs, Pacific Gas and Electric (PG&E), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E). In the golden state, it could impede California efforts to avoid new power outages. For the rest of the country, it may be a lesson in what NOT to do to avoid reliability crises.

The PCIA proceeding was initiated in 2017 to calculate the per-kWh charge to compensate IOUs that lost customers to the new LSEs for generation already procured to meet state renewables mandates. A high PCIA could unfairly shift "legacy" above-market costs to new LSEs. But a low PCIA could allow new LSEs to benefit from newer "vintage" low-cost renewables by leaving higher-cost, older vintage renewables in utility portfolios, disadvantaging IOU customers who would bear the higher costs… click here for more

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